Government secures N$10 billion loan
The government has secured a N$10 billion loan from the African Development Bank (AfDB) and intends to use the money to fund the fiscal deficit while also attending to infrastructure projects.
With the boost in funding, finance minister Calle Schlettwein stressed that the facility did not add to Namibia's debt woes.
“This is not an additional loan over and above the budget and Medium-Term Expenditure Framework. It is also not a budget support facility that enhances the budget per se; rather, it is a financing mechanism to partially fund the budget deficit as projected in the budget and Medium Term Expenditure Framework,” he explained.
“Namibia approached the African Development Bank, a 'triple A-rated' multilateral development finance institution, early this year for a partial budget deficit financing instrument for the current 2017/18 fiscal year and the 2018/19 fiscal year.”
Namibia had benefitted from AfDB programmes in the past, suggesting that there was nothing untoward the arrangement.
“This is not the first time that Namibia is benefiting from the AfDB financing arrangements. Key infrastructure projects such as the Walvis Bay container terminal, oil storage facility and some of the road infrastructure projects are also being financed through an AfDB loan,” said Schlettwein.
“The AfDB, as the African development finance institution, was established to finance developmental and socio-economic needs for its members,” added Schlettwein.
The loan will be split two ways, with 60% of the total geared towards addressing the deficit while the rest will address infrastructure needs.
“The envisaged combined total amount of the operation over a two-year period is up to N$10 billion, to be split in a ratio of 60:40 to support the general budget deficit financing and for targeted financing of development projects.
“The total combined amount for two-years comprises N$6 billion, to be equally split into equal tranches of N$3 billion each over the two-year period. Of course, deficit financing includes some of the development spending which supports infrastructure development. The N$4 billion that will support infrastructure financing is significant from the point of view of supporting long-term economic growth and job creation objectives.”
Allying anticipated market jitters in the wake of a possible downgrade, the finance minister said: “This funding arrangement is a programme-based policy operation support, alternatively referred to as the Namibia Economic Governance and Competitiveness Support Programme (EGCSP). This will be a South African rand-denominated instrument, thus naturally hedging against exchange rate risks.”
Schlettwein stressed that the government would continue seeking funding in the domestic market.
“The domestic market remains the government's primary source of funding the budget deficit. This programme-based operation is thus a time-bound measure to supplement what the domestic market could provide, while liquidity conditions improve.”
With the boost in funding, finance minister Calle Schlettwein stressed that the facility did not add to Namibia's debt woes.
“This is not an additional loan over and above the budget and Medium-Term Expenditure Framework. It is also not a budget support facility that enhances the budget per se; rather, it is a financing mechanism to partially fund the budget deficit as projected in the budget and Medium Term Expenditure Framework,” he explained.
“Namibia approached the African Development Bank, a 'triple A-rated' multilateral development finance institution, early this year for a partial budget deficit financing instrument for the current 2017/18 fiscal year and the 2018/19 fiscal year.”
Namibia had benefitted from AfDB programmes in the past, suggesting that there was nothing untoward the arrangement.
“This is not the first time that Namibia is benefiting from the AfDB financing arrangements. Key infrastructure projects such as the Walvis Bay container terminal, oil storage facility and some of the road infrastructure projects are also being financed through an AfDB loan,” said Schlettwein.
“The AfDB, as the African development finance institution, was established to finance developmental and socio-economic needs for its members,” added Schlettwein.
The loan will be split two ways, with 60% of the total geared towards addressing the deficit while the rest will address infrastructure needs.
“The envisaged combined total amount of the operation over a two-year period is up to N$10 billion, to be split in a ratio of 60:40 to support the general budget deficit financing and for targeted financing of development projects.
“The total combined amount for two-years comprises N$6 billion, to be equally split into equal tranches of N$3 billion each over the two-year period. Of course, deficit financing includes some of the development spending which supports infrastructure development. The N$4 billion that will support infrastructure financing is significant from the point of view of supporting long-term economic growth and job creation objectives.”
Allying anticipated market jitters in the wake of a possible downgrade, the finance minister said: “This funding arrangement is a programme-based policy operation support, alternatively referred to as the Namibia Economic Governance and Competitiveness Support Programme (EGCSP). This will be a South African rand-denominated instrument, thus naturally hedging against exchange rate risks.”
Schlettwein stressed that the government would continue seeking funding in the domestic market.
“The domestic market remains the government's primary source of funding the budget deficit. This programme-based operation is thus a time-bound measure to supplement what the domestic market could provide, while liquidity conditions improve.”
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